The Effect of Corporate Social Performance on Audit Hours: Moderating Role of the Emphasis of Matter Paragraphs in Audit Report

Kim, Hyun Ah; Jung, Nam Chul

doi:10.3390/su12030931

Cited by 7 publications

(8 citation statements)

References 38 publications

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“…Big 4 auditors, without much difficulty, should detect such opportunism and bring it to light (Prior et al, 2008). Kim and Jung (2020) find that audit hours are negatively correlated with corporate social performance, indicating that corporate social activities reduce firms' risks. However, this correlation is no longer significant in firms with emphasis of matter paragraphs, suggesting that auditors do not hold interest in CSR if it is employed to mask firms' deceitful financial reporting.…”

Section: Hypothesis Developmentmentioning

confidence: 94%

Is auditor tolerant of earnings management in socially responsible firms? Evidence from China

Hoang

Tran

et al. 2022

ARA

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PurposeThis study examines the effect of audit quality on earnings management to beat earnings targets among Chinese listed firms, taking into account the firms’ corporate social responsibility (CSR) practice.Design/methodology/approachThe sample consists of all A-shares listed in the Chinese stock market from 2001 to 2019, except firms in the financial industry. Probit estimator is employed to observe the effect of audit quality, proxied by a binary variable indicating whether a firm is audited by a Big 4 audit firm, on the behavior of earnings management to beat earnings targets. Industry and year fixed effects are incorporated into the models to control for differences among industries and time periods.FindingsThe result of this study reveals that audit quality disciplines earnings management to beat earnings targets in Chinese firms. This result holds across different specification and endogeneity tests. The authors further find that auditors seem to be more tolerant to earnings-managed firms that actively disclose CSR activities. However, this moderating effect of CSR disclosure only exists among firms that manage earnings less aggressively.Practical implicationsThe findings of this study suggest that market participants should be mindful of the earnings management phenomenon and make their investment decisions after carefully dissecting and confirming the truthfulness of firms’ financial reporting. Regulators should raise the requirement on the capacity of auditing services to ensure the quality of the audit outcome.Originality/valueThis study is the first to investigate the effect of audit quality on earnings management to beat earnings targets in Chinese firms. Moreover, this study pioneers in observing the moderating effect of CSR disclosure on the relationship between audit quality and earnings management.

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Section: Hypothesis Developmentmentioning

confidence: 94%

Is auditor tolerant of earnings management in socially responsible firms? Evidence from China

Hoang

Tran

et al. 2022

ARA

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“…Risiko litigasi membuat pelaporan keuangan lebih terlihat dimanipulasi, karena terdapat informasi yang tidak sesuai dengan kondisi perusahaan (Irwandi & Pamungkas, 2020). Selain itu terjadinya risiko litigasi membutuhkan waktu audit yang banyak sehingga dapat menyebabkan keterlambatan dalam pelaporannya (Kim & Jung, 2020). Hal tersebut sesuai dengan penelitian Krishnan et al (2011) dan Purnami et al (2018) yang menemukan bahwa risiko litigasi berpengaruh pada kualitas pelaporan keuangan, dimana tingginya litigasi dalam perusahaan Rusell dan Bank di Indonesia akan meningkatkan salah saji material sehingga menimbulkan ketidakakuratan dalam pengungkapan pelaporan keuangan.…”

Section: Pendahuluanunclassified

Pengaruh risiko litigasi, ketidakpercayaan investor, dan financial leverage terhadap kualitas pelaporan keuangan dengan komite audit berkeahlian hukum sebagai pemoderasi

Handayani

Wahyudi

2022

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This study aims to analyze the effect of litigation risk, investor distust proxied by institutional commissions and financial leverage as proxied by Debt to Equity Ratio (DER) on the quality of financial reporting proxied by accrual earnings managemeny by measuring the Stubben (2010) model through an approach to discretionary review and audit committee of legal experts as moderating variables. This research uses quantitative causality method. The sample consists of 28 manufacturing companies from the consumer goods industry on the Indonesia Stock Exchange in 2019-2020. Samples were taken using a purposive sampling technique, and data analysis using the SmartPLS 3.0 application. The results of the study prove that there is a significant influence on litigation risk with the quality of financial reporting. In addition, the results of the study do not prove that there is an effect on investor distrust and financial leverage with the quality of financial reporting. Then this study shows the results that the audit committee of legal experts cannot moderate the effect of litigation risk, investor distrust and financial leverage on the quality of financial reporting in consumer goods companies on the Indonesia Stock Exchange in 2019-2020.

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“…Several studies have investigated the impact of CSR behavior/performance on audit efficiency (Li and Choe, 2017;Kim and Jung, 2020). Specifically, Kim and Jung (2020) Evidence from China…”

Section: Introductionmentioning

confidence: 99%

“…Unlike studies focusing on the association between CSR performance and ARL or audit fees, this study examines how CSR disclosure/reporting action affects a firm’s audit efficiency. Several studies have investigated the impact of CSR behavior/performance on audit efficiency (Li and Choe, 2017; Kim and Jung, 2020). Specifically, Kim and Jung (2020) show that CSR performance will bring lower audit risk and ARL.…”

Section: Introductionmentioning

confidence: 99%

“…Several studies have investigated the impact of CSR behavior/performance on audit efficiency (Li and Choe, 2017; Kim and Jung, 2020). Specifically, Kim and Jung (2020) show that CSR performance will bring lower audit risk and ARL. Compared to the existing studies, we estimate more on the mandatory disclosure of CSR reports conducted by the firms, not on the CSR activities themselves.…”

Section: Introductionmentioning

confidence: 99%

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Does mandatory CSR disclosure affect audit efficiency? Evidence from China

Wang

2023

MAJ

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Purpose This study aims to examine the causal relationship between mandatory CSR disclosure and financial audit efficiency. Design/methodology/approach The authors use the unique institutional setting of China, where a subset of listed firms are mandated to disclose their corporate social responsibility (CSR) reports. The authors use propensity score matching and difference-in-differences approaches to compare audit efficiency in the pre- and post-mandatory CSR disclosure periods between the treatment and control groups. The regression models are estimated with robust standard errors clustered at the firm level. Findings This study finds that following China’s adoption of the mandatory disclosure of CSR, audit report lags decreased by 6% on average, suggesting that audit efficiency improved greatly following mandatory CSR disclosure. Moreover, this association is stronger when firms have better CSR performance, higher CSR report preparation costs, more earnings management before disclosure regulations and better internal controls and when firms belong to high-profile industries and in Big 4 (Big 10) accounting firms. Moreover, neither audit quality nor audit fees decrease when shorter audit lags occur for firms with mandatory CSR disclosures. Overall, the evidence suggests that mandatory CSR disclosure has a positive effect on audit efficiency and that the improvement of audit efficiency does not come as a consequence of reducing audit fees or deteriorating audit quality. Research limitations/implications The results reported in this study have practical and policy implications for policymakers, accounting firms and auditors to pay more attention to CSR information. Originality/value This study provides evidence of the causal relationship between mandatory CSR disclosure regulation and audit efficiency. It enriches the research on audit service production efficiency from the perspective of nonfinancial information disclosure.

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The Effect of Corporate Social Performance on Audit Hours: Moderating Role of the Emphasis of Matter Paragraphs in Audit Report

Cited by 7 publications

References 38 publications

Is auditor tolerant of earnings management in socially responsible firms? Evidence from China

Is auditor tolerant of earnings management in socially responsible firms? Evidence from China

Pengaruh risiko litigasi, ketidakpercayaan investor, dan financial leverage terhadap kualitas pelaporan keuangan dengan komite audit berkeahlian hukum sebagai pemoderasi

Does mandatory CSR disclosure affect audit efficiency? Evidence from China

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